Food waste can be commercially astute, socially responsible, and great for customers (bear with me…) - all it takes is a change in perspective, and some basic maths. Eliminating food waste is easy - keep really low stock levels. 100% availability is equally easy - order too much. The trick is getting the balance right - ordering just enough stock to give the customer what they want, and not so much as to create waste (through products going out of date).
Why do so many bread departments look like this in the morning? Then empty in the evening?It’s normally to avoid perceived ‘waste’ at the end of the day. For the purposes of this article, I am defining waste as having 3 component parts:
Q: How can we change the perception of waste from bad, to good?
A: Record waste at cost price, not retail sales price
Most retailers set their waste budgets at retail price. Simply put, if an item that sells for £1 is thrown away, it is recorded as £1 on the waste budget. Surely the reality is more complex than this, depending on what the product actually cost? If the retailer paid 50p for that product, there is an argument to say that 50p should be recorded on the waste budget.
The word ‘Waste’ has negative connotations, and can be terrible for PR, and wasting at ‘retail’ drives a set of wrong behaviours. It encourages retailers and supply-chain managers to minimise waste, often at the expense of availability.
Would it make a difference if we think of it as ‘over-supply’, rather than ‘waste’?
Here’s an example of the in-store bakery baguette. It makes for a good example because it is easy to flex supply - shove more flour in the mixer (I’m no expert), and it is very low cost to produce.
An in-store bakery baguette:
In scenario 2, accounting for waste at retail price makes this look like a bad decision, but wasting at cost price it looks like a great decision - but it’s the same behaviour - just a different way of calculating the impact.
(The other problem in scenario 1 is that by going out of stock earlier in the day, you will never know what you could have sold - the best algorithm will never be 100% accurate)
So by looking at true profit, rather than ‘perceived waste value’, you get:
What to do with the 50 wasted ones? There are now lots of socially responsible solutions to over-stocks of food products:
Tesco initiative: https://www.independent.co.uk/news/business/news/tesco-to-give-all-unsold-food-to-charity-after-finalising-deal-a6925971.html
There are lots of other charitable solutions such as:
One big caveat: This doesn’t apply across all products to the same degree - it depends on the margin (the higher the % margin, the more you can over-supply), but the principle is the same.
An additional data perspective - get into the detail, and look at the stores:
As well as recording waste at cost the other problem is how retailers look at their data. Due to the difficulty of consuming large tables of data, buyers are forced to look at waste in aggregation, and not at store level. Often high wasting products are only high wasting in some stores, and correcting these stores (either by amending forecasts, facings or de-listing altogether) can have a huge impact on waste reduction.
Example: high-end steak comes in pack-size of 12, with shelf life of 7 days, sells at £8 (RRP)100 Stores (high affluence, high traffic, weekly shop) sell (at full price) 24 units a week, so have zero waste:
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